Bangkok Post : Keeping foreigners out serves whose interests?

LAND OWNERSHIP AND FOREIGN INVESTMENT

Preventing foreigners from owning land and property in Thailand does many things: it protects powerful Thai landlords and agricultural monopolies, forces overseas investors to consider setting up shop in other regional markets, drives Thai capital from the country and provides a pool of nationalist bile for tub-thumping politicians to draw on and whip up a frenzy of anti-foreigner sentiment at the drop of a hat.

What it does not do, however, is support the development of a sustainable and competitive local economy.

The Land Act and the Foreign Business Act (FBA) are the two main laws restricting the foreign ownership of businesses and land, capping the maximum foreign share at 49% in most cases.

The FBA has its roots in the Revolutionary Party's Announcement of National Executive Council No. 281 issued in 1972 by the then military government. This was a time when waves of refugees and immigrants were flooding in from China and the legislation was passed to prevent newcomers from poaching jobs as hairdressers and tuk-tuk drivers from Thais.

Since then its remit has developed into protecting areas where "Thais are not yet ready to compete". Through its evolution into the FBA, the law has been tinkered with a number of times, mostly around what constitutes foreign ownership.

In 1991, the Anand Panyarachun administration took the view that such ownership should be based on the amount of registered foreign capital. The Surayud Chulanont government attempted to use a more reactionary definition which would have back-pedalled on these liberal developments if it had been passed.

These technical definitions can and will have a profound effect on investment in Thailand and the country's long-term economic and social development.

Whether a full recovery from the current economic crisis is underway remains to be seen. But one of the key lessons learned by Thailand and many other Asian countries is that they must move away from an over-reliance on exports and international trade, and build a more sustainable base that can better weather any future economic storms.

The government has said it wants to make such aims policy. But these grand goals will remain mere pipe-dreams without opening up the economy to foreign investment, economists say.

Thai exports perform well not simply because of their intrinsic value but due to their reliance on foreign capital, which is much more efficient than Thai capital, says Supavud Saicheau, managing director and head of research at Phatra Securities. Allowing this more efficient capital to percolate into the Thai economy would improve a wide range of industries, particularly at a time when global funds are scarce.

This scarcity of global capital is also leading Thai companies to make more overseas investments, significantly increasing the risk of losses, Dr Supavud said.

"What is interesting is the more protectionist we are, the more we chase away our own capital. That's very unfortunate, because at the end of the day you want to have plentiful capital in Thailand to make labour relatively scarce and drive up wages," he said.

"You do that by flooding the country with good capital, both foreign and domestic... I don't know a way out; it will just get worse because there will be a greater scarcity of capital in Thailand at the expense of wages."

Observers say most Thai governments have known that liberalising foreigner ownership would benefit both the Thai economy and its people.

This is why the rhetoric over cracking down on the use of Thai proxies and nominee companies to buy land and businesses never transforms into action despite being illegal; any such move would drive out foreign investment and have a devastating impact on the country.

But allowing greater foreign participation would be nothing short of political suicide. "The political cost [of liberalisation] is too great for the politicians to risk," says Dr Deunden Nikomborirak, research director at the Thailand Development Research Institute and an expert on the FBA.

While there are understandable concerns that easing regulations would enable foreign multinationals to snap up agricultural land, drive up rents and force farmers from their land, most resistance to such change is not born from a desire to protect the poor but to maintain existing monopolies.

Defending the status quo is a highly profitable affair for an elite group of business people, politicians and bureaucrats.

Statistics on the concentration of wealth in the private sector are both illuminating and disturbing. Some 10% of companies listed on the Stock Exchange of Thailand create 86% of the sector's wealth. PTT and its subsidiaries alone account for about 52%.

This is a "grave concern for Thailand", says Dr Deunden.

"When you look at the biggest Thai companies, none of them compete overseas, they compete in the domestic market, they compete on the basis of rules and regulations that continue to favour them."

A look at the board of powerful firms quickly stifles any hope of change. The PTT's board of directors includes high-ranking officials from the Finance Ministry, Ampon Kitti-ampon the secretary-general of the National Economic and Social Development Board, Attorney-General Chaikasem Nitisiri and Khunying Pornthip Jala, secretary-general of the Council of State.

"Whose interests are they protecting? They are government employees, but they receive PTT's very handsome honorarium of, I think, 12 million baht per year," says Dr Deunden, adding that the boards of other state enterprises and major firms reveal the same picture.

"This is how it works," she says. "Perks given to bureaucrats. This is why we cannot break this cartel."

Protecting Thai businesses until they can compete in the global market is fair and just. But any such moves must involve governmental commitment to developing those sectors so they can punch above their weight in the global arena.

Next time the usual suspects emerge to block liberalisation, we should be asking who and what are they really fighting for: the average man and woman on the street, or their own bank balances?